IS BAT REALLY LEAVING CROATIA ?

BUSINESS & TECH Analysis: Is BAT really leaving Croatia? This is an example of how a bad tax system disperses investors Vuk Vukovic for Telegram: If we have already managed to attract an investor, which is otherwise difficult for us, then there is no point in driving him away MR MARKO REPECKI 42 MINUTES AGO 0 RECOMMENDATIONS 0 COMMENTS LAST CHANGE: SEP 16, 2020 Entrepreneurs have been pointing out the unpredictability of the tax system in Croatia as one of the key problems for years, which prevents them from quality planning. Such an environment adversely affects investments, so investors mostly bypass Croatia, which negatively affects economic growth and (unemployment). The latest victim of such an environment could be British American Tobacco (BAT), a tobacco multinational, which bought the Rovinj Tobacco Factory from Adris about five years ago and then turned into one of the largest investors in Croatia. BAT IN CROATIA EMPLOYS 1,600 PEOPLE It has been rumored for months, since March this year, that BAT could close its operations in Croatia. Currently, in addition to the factory in Kanfanar, which is one of the most modern in the region, they also have a tobacco processing factory in Virovitica. BAT directly employs about 1,600 workers in Croatia. In addition, 400 subcontractors, tobacco growers from Podravina, are also connected to their business, who would also be affected by the withdrawal of BAT from Croatia. THE UNPREDICTABILITY AND UNFAIRNESS OF THE TAX SYSTEM Although BAT did not want to comment officially on the reasons for considering leaving, those familiar with the situation in the sector say they have two problems - the unpredictability of business conditions and, in their opinion, an unfair system of taxation of tobacco products. Namely, excise duties are raised in Croatia without any plan, decisions mainly depend on how much money is missing in the budget. There is no excise calendar as is common in developed countries, which would allow companies to know in advance when excise duties may increase, making it easier to plan their business and avoid mostly unpleasant surprises. HEATED TOBACCO IS LESS TAXED THAN CLASSIC CIGARETTES In addition, in recent years, increasingly popular products so-called. heated tobacco occupying an increasing share of the market. Currently, the market share is around five percent, but it is growing strongly. Sales of heated tobacco in 2019 increased by about 250 percent, and this year is expected to increase by about 200 percent. But what bothers manufacturers is that heated tobacco is less taxed compared to classic cigarettes - it has about 3.5 times less excise duty than cigarettes. The state receives HRK 4.88 from one package of heated tobacco, while excise duty from the packaging of the cheapest cigarettes amounts to over HRK 16. Given that both have approximately the same price at kiosks, the earnings for importers of heated tobacco products are far higher compared to the production of classic cigarettes, which, of course, harms BAT, which has production in Croatia. In the last three years, when you look at the cheapest cigarettes, excise duties increased by 2.80 kuna, while for heated tobacco until April this year there was no increase - then they were raised by 1.22 kuna. All this led BAT to consider closing its business, although in the last five years, with around 4.7 billion kuna invested, they were one of the largest investors in Croatia. VUK VUKOVIC: THIS IS A BAD MESSAGE TO ALL INVESTORS Economist Vuk Vukovic says that this is a much broader problem and that the problems that BAT is facing are a bad message to all other investors. "Due to political decisions and an inefficient tax system, they are forced to think about closing down, and given the investments made so far, this is certainly not an easy decision. If we have already managed to attract an investor, which is otherwise quite difficult for us, then there is no point in driving him away with such moves. This is not only a question of BAT, but also of all other investors to whom a bad message is sent ", says Vukovic. In addition, Vukovic warns that the tax system should be stable and predictable, that changes do not happen often, and if they do happen, they go in the direction of relief. THE TEXT CONTINUES AFTER THE AD Sponsored content HBO GO - Enjoy your tablet series while the kids watch cartoons on TV. Midas - Native Internet Advertising By the way, AR Packaging, a former Istragrafika, which works for packaging for BAT's factory in Kanfanar and whose business largely depends on these jobs, also issued a statement today. They announced that the closure of BAT's factory, which is their biggest customer, would negatively affect their business and the realization of their plans - an investment cycle worth 5 million euros, which they started last month